Delegated Regulation (EU) 2017/2358 is amended as follows:
in Article 4(3), point (a), point (i) is replaced by the following:
it takes into account the objectives, interests and characteristics of customers, including any sustainability-related objectives;’;
Articles 5 and 6 are replaced by the following:
‘Article 5
Target market
1. The product approval process shall for each insurance product identify the target market and the group of compatible customers. The target market shall be identified at a sufficiently granular level, taking into account the characteristics, risk profile, complexity and nature of the insurance product, as well as its sustainability factors as defined in Article 2, point (24), of Regulation (EU) 2019/2088 of the European Parliament and of the Council (^{11}).
2. Manufacturers may, in particular with regard to insurance-based investment products, identify groups of customers for whose needs, characteristics and objectives the insurance product is generally not compatible, except where insurance products consider sustainability factors as referred to in paragraph 1.
3. Manufacturers shall only design and market insurance products that are compatible with the needs, characteristics and objectives, including any sustainability-related objectives, of the customers belonging to the target market. When assessing whether an insurance product is compatible with a target market, manufacturers shall take into account the level of information available to the customers belonging to that target market and their financial literacy.
4. Manufacturers shall ensure that staff involved in designing and manufacturing insurance products has the necessary skills, knowledge and expertise to properly understand the insurance products sold and the interests, objectives, including any sustainability-related objectives, and characteristics of the customers belonging to the target market.
Article 6
Product testing
1. Manufacturers shall test their insurance products appropriately, including scenario analyses where relevant, before bringing that product to the market or significantly adapting it, or in case the target market has significantly changed. That product testing shall assess whether the insurance product over its lifetime meets the identified needs, objectives, including any sustainability-related objectives, and characteristics of the customers belonging to the target market. Manufacturers shall test their insurance products in a qualitative manner and, depending on the type and nature of the insurance product and the related risk of detriment to customers, quantitative manner.
2. Manufacturers shall not bring insurance products to the market if the results of the product testing show that the products do not meet the identified needs, objectives, including any sustainability-related objectives, and characteristics of the target market.
in Article 7, paragraph 1 is replaced by the following:
‘1. Manufacturers shall continuously monitor and regularly review insurance products they have brought to the market, to identify events that could materially affect the main features, the risk coverage or the guarantees of those products. They shall assess whether the insurance products remain consistent with the needs, characteristics and objectives, including any sustainability-related objectives, of the identified target market and whether those products are distributed to the target market or are reaching customers outside the target market.’;
in Article 8, paragraph 3 is replaced by the following:
‘3. The information referred to in paragraph 2 shall enable the insurance distributors to:
understand the insurance products;
comprehend the identified target market for the insurance products;
identify any customers for whom the insurance product is not compatible with their needs, characteristics and objectives, including any sustainability-related objectives;
carry out distribution activities for the relevant insurance products in accordance with the best interests of their customers as prescribed in Article 17(1) of Directive (EU) 2016/97.’;
in Article 10, paragraph 2 is replaced by the following:
‘2. The product distribution arrangements shall:
aim to prevent and mitigate customer detriment;
support a proper management of conflicts of interest;
ensure that the objectives, interests and characteristics of customers, including any sustainability-related objectives, are duly taken into account.’;
Article 11 is replaced by the following:
‘Article 11
Informing the manufacturer
Insurance distributors becoming aware that an insurance product is not in line with the interests, objectives and characteristics of the customers belonging to its identified target market, including any sustainability-related objectives, or becoming aware of other product-related circumstances that may adversely affect the customer, shall promptly inform the manufacturer and, where appropriate, amend their distribution strategy for that insurance product.’.